“What I mean by that is that you’ll have advisers recommend insurance within superannuation, and in some instances I’ve seen cases where the insurance premiums actually exceed the superannuation guarantee contributions that the client makes,” she said.

“What that means is the client’s superannuation balance is going backwards and there’s no long-term assessment of what the retirement implications are for this client. That’s one concern that has come up recently,” she said.

Ms Cruz also flagged some “basic” recurring issues, such as failure to consider the implications of rolling over a client’s superannuation policy from an APRA fund to an SMSF.

“When clients have insurance, if they roll over their super and the insurance is cancelled, if they’ve got pre-existing medical conditions there could be a big risk that they won’t be able to get adequate cover elsewhere, or they’d have premium loading added onto their insurance,” Ms Cruz said.

Ms Cruz fears these issues will grow after 30 June, given the restrictions accountants face under a limited licence when it comes to discussing insurance in superannuation.

Speaking previously to SMSF Adviser, solicitor at The Fold Legal Jaime Lumsden Kelly explained the “awkward” situation accountants will face when a client comes to them with pre-existing insurance within a superannuation fund.

“The accountant can’t advise on that insurance because they have no full advice authorisation in relation to insurance; all they have is a class of product authorisation, so they can only talk about life insurance in general terms and can’t advise on specific products,” she said.

“So what in practice is going to have to happen – and this is going to be a little bit awkward for the accountants – is that when they set up an SMSF and recommend a rollover, before they roll that money over, they’re going to have to send the client to a financial planner who can look at the life insurance that sits in that [fund],” she said.

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